Dr. Werner Vogels, CTO at Amazon, oversees technology strategy for Amazon Web Services- the world’s largest provider of web-delivered infrastructure services to developers. In Tel Aviv for this week’s AWS Summit (http://aws.amazon.com/aws-summit-2012/Telaviv), Werner shares his approach to innovation, biggest strategic mistake and how AWS strives to be “Earth’s most customer-centric company”.

Amazon Web Services began in 2006 as a tool to sell excess infrastructure capacity to developers. Although the company does not break out AWS revenue, there are estimated to be more than half a million AWS customers. In addition, “cloud and other services” accounted for around 3% of Q2 revenue, leading some Analysts to project 2012 AWS revenue at $1.93 billion (http://www.trefis.com/company?hm=AMZN.trefis&driver=idAMZN.0160#). Of course, this is a high volume, low margin business. AWS excels at low-cost efficiency- the company has made 20 price cuts since launch. Werner looks back on how the company has been able to innovate while continually lowering margins:

AWS Overview of Services

Customer-driven Innovation: “Product ideas come from our customers. Our teams are lean, independent and spend their time with customers. Most of my time is spent with customers. When we consider new products and services, customers tell us what they need”.

One approach to reduce over-engineering is ‘Working from the Customer Backwards’. “We do the whole Product Development process backwards, beginning with a press release that lists all the features. Next, we prepare the FAQ (frequently asked questions). All of this before a single line of code has been written. Our approach ensures we only develop products our customers need. Everything else is left out”.

When asked about pricing by the minute, something offered by AWS competitor Profit Bricks, Werner isn’t convinced. We are customer focused, not competitor focused. To date, there has been no feedback from any of our customers that (charging by the minute) is something that would interest them”.

Strategic Mistakes: “On multiple occasions, we waited too long to launch services we should have brought to market sooner. One example is the DNS service, which we should have launched from the beginning. Also, the cloud search service was a clear customer pain point and should have been prioritized”.

Another mistake was focusing on misinformation in the market. We have invested in building out security, performance and reliability. This includes doubling the number of availability zones (data centers) to 8 around the world”.

Amazon Scale Growth

“Earth’s most customer-centric company”: “We make sure all decisions are made in the context that customers are the priority. Almost every meeting starts with the voice of the customer. We won’t build anything without strong direction from our customer base. Also, we are fighting against the traditional mindset of high margin, lock-in. AWS customers have the flexibility to choose their preferred operating system, middleware, programming language, etc. across a range of pricing options. We also ensure flexibility through a comprehensive partner ecosystem with some of the world’s most established enterprise software vendors”. Some Israeli AWS customers participating in the AWS Summit include the following:

Eze is a General Partner at Google Ventures Europe. Before joining GV, Eze started Campus London, Google's first physical hub for startups, and led Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.

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Eze Vidra

Eze is a General Partner at Google Ventures Europe. Before joining GV, Eze started Campus London, Google's first physical hub for startups, and led Google for Entrepreneurs in Europe. He's an experienced product manager and startup mentor. In 2012 Eze founded Techbikers, a non-for profit supporting children education in developing countries.